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11th June 2019
FCA overdraft rules will protect vulnerable people from spiralling fees, says Citizens’ Advice
The Financial Conduct Authority’s (FCA’s) decision to introduce reforms to the overdraft market should help thousands of people from getting trapped in a debt spiral, says Citizens' Advice. The organisation helped almost 30,000 people with overdrafts last year.
It is one of the most common consumer credit issues they help people with. Last year the organisation supported 24,000 people struggling to repay their overdraft. Nearly 3,000 people had problems specifically related to overdraft charges.
Overdraft issues overwhelmingly affect socially-disadvantaged people and of the people who came to Citizens' Advice with a problem last year:
• 2 in 5 had a disability or long-term health condition
• 2 in 5 had a monthly income of less than £1,000
• 1 in 5 were from a BAME background
• 1 in 4 were single parents
Gillian Guy, Chief Executive of Citizens' Advice, said: “Overdraft charges can have serious knock-on effects for people’s debt and mental health. These new rules should help thousands of people from getting trapped in a debt spiral.
“Many people who seek our help with overdraft problems have had trouble understanding the way the fees are calculated. The FCA’s changes will simplify charging structures and lower the cost of these products for consumers.
“If, after these measures are introduced, people still pay over the odds, the FCA should review the need for an interest-rate cap to ensure no one is paying back more than twice what they borrowed.”